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The news from China is that a project to create infrastructure for Blockchain went live on April 25th. It is called BSN or Blockchain-based Service Network.
When people ask me “When will we know that blockchain is successful”? My answer : “When blockchains disappear.” This does not mean that blockchains will go away. Like water supply, sewer or electric lines, often buried underground, the bedrock of financial markets infrastructure will be augmented by blockchain and the internet of value should work automatically, behind our sight lines.
When talking about the internet, most people do not discuss details of TCP/IP or how internet caching and the https protocol work. Connect with friends and family through email, talk to grandma using video, order groceries online, post our own moves on Tik-Tok, meet with colleagues in a Zoom meeting. People talk about what they can do. Not about the details of internet as technology. Of course, a cadre of geeks will be deeply involved in details so that the user experience becomes seamless.
Blockchain-based Service Network
Recognizing this fact, infrastructural developments to make blockchain adoption, deployment and operation easier for the Small and Medium Enterprises (SMEs) has been started at a gigantic scale in China. BSN will integrate with the global ambitions of the belt and road initiative. This article is on how the Blockchain-based Service Network will make blockchain disappear in China. As blockchain and internet of value maturity creeps upon us, more and more such turnkey solutions will appear. They will take different forms in different countries. However, their capabilities and costs will converge.
The state technology company, a state backed payments company and big chinese mobile operators are behind BSN. BSN is executing what Xi Jinping promised, a Blockchain revolution. We can dismiss this as predictable, centralized, controlled and watched over by the government. It would be a mistake to see only that in BSN. It is a way forward for creating infrastructure at scale. BSN is only focused on what is called consortium chains or enterprise blockchains in China, although public blockchain support is allowed in other countries.
BSN is the Internet of Blockchains
The technical whitepaper for BSN says that it “integrates cloud resources, underlying frameworks, operating environments, key management, development SDK and gateway API”. Looking beyond the words, it is blockchain agnostic. The capability provided by BSN include interoperability between the chosen chains both locally and internationally. In addition, there are facilities for interaction with non-blockchain external systems. For these capabilities they have partnered with external solutions like Cosmos and Chainlink. They chose not to re-invent the wheel, just adapt it to their culture.
The aim is to enable building permissioned blockchain networks in China as easy as creating a website and just as costly.
The BSN launch implements the following capabilities
- Easy to get on for Small and Medium Enterprises (as simple as building a website)
- No deep knowledge of blockchain needed to participate.
- Any user, including small and medium enterprises can create an account, choose a blockchain framework from a list, deploy smart contracts, manage user accounts and billing by logging into a local portal.
- To interact with other businesses, they either join a consortium or interoperate with consortia, using facilities provided as part of the BSN.
- Built in data protection and privacy, presumably from all eyes other than that of the government.
- Face a uniform user interface for interacting with multiple chains and to manage costs. The use of a single private key and a single cryptographic algorithm, allows easy interoperability and a simpler user interface.
- A cost of 2000 to 3000 renminbi per year for a 4 node network confined to a single public city node.
Public city nodes (PCN) are the basic constructs of BSN. They are local to a geographic area. They are already available in most big cities in China, as well as in some global cities. PCNs are built on cloud platforms, each PCN is on the local cloud infrastructure of a cloud provider like Alicloud, Tencentcloud, Azure, AWS or Google cloud. These are on a highly connected network. Users (businesses) interact with their local PCN through a BSN portal, administered and serviced by service providers who are accredited. User accounts, self-service, billing and other services are pre-built and available on these platforms. All smart contract deployment, as well as other blockchain specific tasks are also performed through the portals.
Another big push is in the area of training and education. Free training courses for developers on general blockchain concepts are available. In addition, courses targeting BSN user management as well as free template applications for certain business patterns like provenance, supply chain are also made available.
Efforts in Other Jurisdictions
If you look through the capability lens, we see similar trends in the enterprise blockchain space here in the United States and elsewhere in Europe and around the world. Uniform identity management and interoperation emerge as themes. Most cloud providers, like AWS, Azure and Google Cloud provide turnkey solutions in the form of Blockchain as a Service (BaaS), which make deployment and operation of blockchain consortia with lower membership numbers possible. In addition, the traditional overlay of identity management for authentication and authorization are available on most cloud platforms.
To knit them together, the creation of public, low cost and low touch value transfer infrastructure is needed. Standards are needed, for interoperation, for continued operations. Frameworks for launching and maintaining chains are needed. Standards work is being done in many Standards Development Organisations like IEEE and ISO. However, experience suggests that these are often behind the curve for a variety of reasons; herding the cats of big organisations and countries result in sub-par standards often established after years of labor.
There is a balancing act between implementation and standards. Establish the standard too early and innovation suffers; establish standards too late, implementations splinter; creating a interoperability nightmare. The establishment of BaaS in big cloud providers provides a reference point for user management, billing and deployment, however they are disconnected. The crystallization of blockchain platforms into a few winners, provides another opening.
As far as Financial Markets Infrastructure in the United States goes, NASDAQ NDAQ
the technology and innovation forward exchange has announced plans to partner with R3 Corda to innovate on digital assets. They have also said that they are interested in an end-to-end approach. Prior partnerships with Chain and Symbiont were also announced. NASDAQ’s imprimatur counts, since they are meant to be blockchain neutral and can spur adoption thru their customers. However, as evident from some of the technology conversations in the NASDAQ adopted platforms, monitoring and control of running nodes is still a challenge. These are the unsexy aspects, but they need to be handled for adoption at scale and for blockchains to disappear.
Token standards being developed by organisations like the Token Taxonomy Framework, global identity standards and data being developed by organisations like the GLEIF, regulatory clarity from FATF recommendations and corresponding national organisations like NIST, a toolkit approach from WEF, all of this helps. We need collaboration from large to small organisations, where open-source consortia like Hyperledger work well. Applications, deployment tools, templates and best practices will unite us. However, we have to be aware that for the use cases to migrate to the applications and business solutions; the lower layers have to be easier to wrangle with pre-built templates and tools for deployment and operations. This is when blockchains will disappear.